A small business owner I know recently contacted me with a wage garnishment horror story.
Her receptionist received a garnishment order while the owner was on vacation. Not knowing what it was, or what to do with it, the paperwork got set aside and forgotten.
Weeks later, to the owner’s great surprise and dismay, the business bank account was frozen, and the entire amount owed by the employee on the garnishment was seized from her account. While that doesn’t seem fair, it is legal. Now it’s up to the business owner to have the employee pay her back over time.
Businesses beware! Wage garnishment paperwork is a big deal!
Mishandle a wage garnishment, and your company will have to pay someone else’s debt:
Wage garnishments need to be handled in a very timely and accurate manner, in order to protect your business from becoming responsible for an employee’s debt.
Even if wage garnishments have never crossed your desktop before, it could easily happen to you. A study by the ADP Research Institute in 2013 revealed that over 7% of workers were being garnished, with child support being the top reason, followed by tax levies, then bankruptcies.
What are wage garnishments?
A writ of garnishment is an order from a court or a governmental entity for an employer to withhold money for a debt from an employee’s paycheck. The employer is to withhold the money and remit it to the entity where it’s due.
As with all regulations, there are restrictions and requirements involved, both federal and state. In Washington, our state requirements tend to be more restrictive than the federal.
Things can get scary if you don’t understand wage garnishments:
- The garnishment paperwork must be responded to within 20 days of the date it was served.
- Depending on where it comes from, you may have to send back multiple copies to various addresses.
- The instructions will be specific and must be followed to the letter and in a timely manner.
A big note of caution: Even if the individual doesn’t work for you, or never worked for you, you must still respond to the paperwork within the 20 days, or your business could become liable to repay 100% of the amount owed.
That’s right: If you are mistakenly sent a writ of garnishment for someone who never worked for you, and you don’t respond to it within 20 days, your company will have to pay the debt of a complete stranger.
The nitty-gritty on wage garnishments:
There are limits on how much can be withheld from an employee’s pay, as it’s expected they will be left a sufficient amount to live on. In general, Washington allows for 25% of the weekly disposable earnings to be garnished (disposable earnings are what remain after all deductions required by law are made).
Garnishments usually come with instructions on how to calculate what you can garnish. If you end up with multiple garnishments on an individual, and it gets confusing, best to contact your attorney or CPA for guidance. Mistakes can be costly!
Processing garnishments and the paperwork can really be cumbersome for businesses. You are permitted to withhold a small fee from your employee’s paycheck to recover some of the cost of the processing for your business.
For example, you can withhold $10 for the first disbursement you make to the Washington State Support Registry, and $1 for each additional disbursement. Again, the paperwork should specify what is permitted.
Never punish an employee for wage garnishments:
One thing you cannot do if the garnishments get to be too burdensome is to terminate your employee!
Washington law specifically states “no employer may discharge, discipline, or refuse to hire an employee because of the entry or service of a wage assignment.”
It goes on to say that if an employer does, “The employer shall be liable for double the amount of damages suffered as a result of the violation and for costs and reasonable attorneys’ fees, and shall be subject to a civil penalty of not more than two thousand five hundred dollars for each violation. The employer may also be ordered to hire, rehire or reinstate the aggrieved individual.”
The wrap-up:
There aren’t really many upsides for employers as it relates to garnishments! It’s someone else’s debt, and it becomes your responsibility to make sure the payments get made!
A misstep along the way on an uninformed employers’ part can mean that someone else’s debt becomes the employers’ debt to pay!
So, learn the rules, inform every staff member that has a hand in the process, and pay good attention to garnishments! Don’t learn a painful lesson the hard way!